Online only retailer Ocado has posted group retail revenue of £348.6 million for the third quarter, a rise of 11.5% on the same period last year.
Commenting on its results, chief executive Tim Steiner hailed the group's endeavours to bring "greater value, quality and convenience to British shoppers while at the same time helping our partners redefine the shopping experience for their own customers."
Here's how leading retail analysts saw the group's performance.
Barclays European Food Retail Equity Research
"Average orders per week grew by 11.4% to 283,000, compared with growth of 11.9% in 1H. Average order size flat at £106.26, compared with a decline of -0.2% in 1H.
"Overall the sales figures are perhaps very slightly underwhelming – Q3 saw the lowest rate of growth in the last year, despite summer being the quietest time of year, which might be thought to free up the capacity needed to meet supposedly unmet demand. There is no new news on international partnerships – which is not necessarily a surprise, but may disappoint some."
Russ Mould, AJ Bell
“Ocado divides market opinion. Some investors think you should ignore the fact it is still loss-making and focus on the growth potential of its Ocado Smart Platform (OSP) while others reckon you are paying far too much today for the promise of jam tomorrow.
“The company has undoubtedly made progress since a shift in strategy to concentrate on selling its OSP service, based on proprietary software and algorithms as well as robotic warehouses, to power online grocery for several international clients. Deals have been struck with the likes of Casino in France, Sobeys in Canada, ICA in Sweden and Kroger in the US.
“However, recent weak second quarter figures from Kroger may create some nervousness that the agreement with Ocado, which is expected to encompass up to 20 sites, might slip down the list of its strategic priorities.
“Third quarter trading for Ocado’s existing UK grocery business is in line with expectations with revenue and average orders up by double digits. Average order size is flat, an improvement on the half-year stage when the value of the average basket shrank, and the company’s revamped robotic warehouses in Hampshire and Bexley are performing well.”
Greg Lawless, Shore Capital
"Ocado has issued a relatively short trading update for the 13 weeks to 2nd September. Retail revenues grew 11.5%, broadly in line with the H1 run-rate of 11.7% and in line with full-year guidance of 10-15% growth. The technology distributor processed an average of 283k orders per week in the period, up 11.4%, with average order size flat year-on-year at £106.
"In terms of licensing the technology Ocado Smart Platform (OSP) to other retailers, there is no news in the Q3 statement aside from the comment 'We are on track to deliver a significant numbers of new CFCs for our solutions partners in the coming years.' On the analyst call, management indicated that Casino was already on site building out the new CFC in Southern Paris and that Sobeys in Canada and Kroger in the US were identifying the first sites for the CFCs to be built over time.
"On the Kroger partnership, there is no sign yet, of the service agreement between the two parties, four months after the partnership agreement was first announced. Management indicated that the signed service agreement
would follow in due course but highlighted that the two parties are working closely together, ahead of formally signing the agreement to develop up to 20 CFCs across the US."
Bruno Monteyne, Bernstein Research
"Ocado Q3 Retail Revenue was £348.6 million, 11.5% growth year-on-year. This was slightly behind our expectations of 12.0% growth, but in line with the company's guidance of 10% to 15% retail sales growth for FY18.
"Cash and cash equivalents stood at £406.1 million which is in line with the mid point of where we expect to be at Q3 (our model is half-yearly for balance sheet items).
"Ramping up orders through Erith [is] much faster than previous CFCs openings. Erith (CFC4) was opened this quarter and processed 20,000 customer orders 14 weeks after opening, this took Andover (CFC3) 15 months to achieve.
"The key message clearly is the speed at which CFC4 is ramping up. This addresses the key risk on the Ocado investment thesis: can Ocado project manage the deployment of 23 new CFCs (for its international partners) in the coming two years? By showcasing the very rapid deployment of CFC4, it showcases the speed at which the new CFCs can be rolled out for partners."
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
